Tuesday, December 09, 2014

A colleague recently called me for some advice. Seems one of his clients (a small dental practice) is considering deleting their group plan and offering to pay for (or at least subsidize) employees' individual health plans. He wanted to know if that would fly, legal-wise.

The short answer, of course, was "no," but given that we're in the midst of Open Enrollment season [Reminder: only 6 days left if you want a January 1 effective date - the cut-off is next Monday], it may be helpful to review the issues.

First, there's nothing immoral, illegal or fattening about deleting a group plan. In fact, that may be the smartest, most cost-effective move an employer could make (or not, YMMV). But if you own (or advise) a small business, you need to know that employers can't use a Health Reimbursement (or any other similar) Arrangement to allow employees to pay for individual plan premiums pre-tax. You can, of course, give them a raise to cover some (or all) of the premium, but remember that this will be taxable income for them [ed: insurance industry old-timers might be thinking about gross-up bonuses about now].

And, of further course, some of these employees may be eligible for a subsidy/cost-sharing on the 404Care.gov site.

A colleague recently called me for some advice. Seems one of his clients (a small dental practice) is considering deleting their group plan and offering to pay for (or at least subsidize) employees' individual health plans. He wanted to know if that would fly, legal-wise.

The short answer, of course, was "no," but given that we're in the midst of Open Enrollment season [Reminder: only 6 days left if you want a January 1 effective date - the cut-off is next Monday], it may be helpful to review the issues.

First, there's nothing immoral, illegal or fattening about deleting a group plan. In fact, that may be the smartest, most cost-effective move an employer could make (or not, YMMV). But if you own (or advise) a small business, you need to know that employers can't use a Health Reimbursement (or any other similar) Arrangement to allow employees to pay for individual plan premiums pre-tax. You can, of course, give them a raise to cover some (or all) of the premium, but remember that this will be taxable income for them [ed: insurance industry old-timers might be thinking about gross-up bonuses about now].

And, of further course, some of these employees may be eligible for a subsidy/cost-sharing on the 404Care.gov site.